A "branch office" is a profit-seeking business entity established for the purpose of doing business in Taiwan, with a head office located in a foreign country. Foreign business entities registered as companies under foreign laws shall first apply for recognition as a foreign company and its establishment of a branch office in Taiwan with the Department of Commerce under the MOEA. The foreign company establishing a branch office shall appoint a representative for litigious and non- litigious matters in Taiwan and a branch manager for managing day-to-day business operations. If the branch manager is a foreign national, he or she shall obtain a work permit from the Council of Labor Affairs. Branch offices shall pay income tax on income generated within Taiwan but are exempt from income tax when they remit their after-tax surplus earnings back to their parent companies, because such remittances are not considered distribution of dividends.
Advantage of Branch Office
- The most tax-efficient form of entity to set up in Taiwan.
- Headquarters can allocate management overhead to Taiwan branch, but such allocation of charges must be done based on group turnover. A CPA certificate is required.
Disadvantage of Branch Office
- Branches cannot enjoy tax incentives available to hi-tech companies and claim tax benefits under double taxation agreements signed between Taiwan and other countries.
- Branches do not enjoy limited liability protection in Taiwan. Their liabilities may be enforced against all the assets of the foreign head office, whether or not the assets are in Taiwan.
- Branches often experience difficulty borrowing funds from local banks. All investments made in Taiwan by the Branch will be registered in the name of its Head Office.
Procedure for setting up a Branch Office
- The foreign investor should first apply to the Central Region Office, MOEA, for an advance check of the Chinese name of his/her company and its field of business, and for retention of that company name.
- He/she should then apply to the Central Region Office, MOEA, for "Recognition of Foreign Company," evaluation of investment amount, and registration as a "Branch of Foreign Company."
- An investor must apply to the tax collection authority of the company's locality to register his/her business.
- The operator of an export/import business must apply first to the Bureau of Foreign Trade, MOEA, for an advance check of its English name, and then apply to that Bureau for registration as an export/import business.
- A company that is engaged in the manufacturing or processing of goods must apply for a factory registration with the local county or city government where the factory is situated. If the factory is located in an export processing zone, science park, or agricultural biotechnology park, the company should apply for registration with the administrative agency in charge of that zone or park.
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